View of the Royal Exchange and Bank of England in London.
Vuk Valcic | SOPA Images | LightRocket | Getty Images
LONDON — The Bank of England on Thursday hiked interest rates for the first time since the onset of the pandemic, increasing its main interest rate to 0.25% from its historic low of 0.1% as inflation pressures mount.
U.K. inflation hit a 10-year high in November as the Consumer Price Index rose by an annual 5.1%, up from 4.2% in October and well above the central bank’s target of 2%.
Meanwhile, the labor market recovery has remained robust, with 257,000 staff added to payrolls in November, even after the end of the country’s furlough scheme.
After the Bank surprised markets by avoiding a rate hike in November, many analysts had suggested that the subsequent data showed the economic conditions were in place to start tightening.
However, the emergence of the omicron variant and its rapid spread in the U.K. have since muddied the outlook going into Thursday’s policy meeting, meaning markets were left guessing.
The International Monetary Fund on Tuesday had urged British policymakers to avoid “inaction bias” ahead of the vote.
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U.K. inflation hit a 10-year high in November as the Consumer Price Index rose by an annual 5.1%.